Is an Employer of Record right for you?
Hiring foreign workers abroad is a tasking process as you will be required to learn, master, and observe all employment-related laws and payroll obligations. You can avoid this problem by partnering with the right employer of record company.
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Employer of Record Definition
To determine whether your organization needs an employer of record (EOR) or not, a detailed definition must be given to the term “employer of record”. Hence, an employer of record is an external company/agency/organization that carries out all international hiring responsibilities, manages international employment laws and international hiring payroll functions of foreign talents in place of a business/organization overseas. They grant businesses easy access to operate, employ and oversee talents anywhere across the globe while they play the role of the business lawful employer in those regions. They made international hiring easy and safe since EOR has finished the whole costly and delaying process of establishing localized subsidiaries globally. Thus, they provide client organizations with the opportunity of leveraging their legal frameworks for perfect and compliant international employment activities and management.
Roles of an EOR
With EOR, your company/organization can employ foreign talents quickly, compliantly, and safely. An EOR functions as the international middleman between an organization and its workers abroad. They manage the employment payroll of your workers and ensure proper compliance with all the international employment laws. EOR shortens the time spent by businesses that want quick scaling in setting up subsidiaries. They take off the stress of creating foreign entities. Employer of record alleviates the risks that are associated with the international employment laws and employment payroll compliance, giving organizations more space to efficiently carry out their activities. An EOR place the employed talents on localized employment payrolls, assign localized employment contracts to them, and effectively handle all other onboarding obligations. The agency also provides your company/business with a registered and lawful structure in ensuring optimal compliance with local guidelines, taxes, and payrolls. The EOR is also responsible for timely and compliant payment of the foreign talents’ wages in their home country’s currencies. Employer of record helps your organization/company in executing and completing all employee payroll deductions, withholding, remittance, and filing with the relevant local statutory agencies.
Significance of an EOR/Global PEO organization for global expansion
Businesses don’t necessarily need EOR services when they have no plans for foreign scaling. Oftentimes, organizations tend to flourish abroad when they decide to employ homegrown talents/workers from that region. However, organizations/businesses must hire EOR services when they plan to operate globally. When hiring talents and operating internationally, companies need to ensure that they comply with, and observe all the statutory and regulatory guidelines in the targeted nation. All nations have their legal obligations, payroll obligations, and other statutory clauses for international businesses to operate. However, learning, mastering, and observing these requirements is very tasking, EOR is up for the rescue.
The main motive of an EOR is basically to act as a professional in surmounting foreign employment laws and statutory obstacles when hiring foreign talents. EOR is primarily used by organizations/companies in alleviating the burden of tax and regulatory compliance, and time wastage in observing foreign employment laws when hiring abroad. EOR saves your organization/company from the costly and painstaking process of creating and maintaining a localized branch in the targeted nation.
Suitability of an EOR for your organization
When determining the suitability of an EOR for your organization, the first question you need to answer is, “is my organization having an interest in going global?”. If the answer is yes, then you need an employer of record to assist you with the process. EOR aids your organization/company in handling international hiring and mitigation of liabilities. Moreover, hiring/partnering with an employer of record needs you to analyze and determine the number of talents you need, the available roles they can assume, the timeline for employment processing, etc. If your business activities and contracts with the employees will be short-term, then EOR is right for your business. If the organization plans on reaching a global community of qualified and skillful talents, hiring the services of an employer of record is okay for the organization.
Advantages of EOR/Global PEO
The perks that an employer of record provides your organization are enormous. An employer of record discharges your organization from creating and managing localized subsidiaries and employment payrolls, thus, allowing efficient organizational management and growth. These are some outlined benefits of an employer of record:
Foreign incorporations are unnecessary
After you’ve decided that your organization/company needs globalization, the next step should be the processing of your decision. If you decide to do this yourself, you will need to create and register a local subsidiary in the host nation you’re targeting. You will have to get an office, register and incorporate the company, register with other relevant agencies, unions, and associations, etc. This process, however, is expensive and time-consuming, as it takes resources in getting legal and financial supports, and weeks, months, or even years to complete.
Avoiding this uphill is one of the major perks of an EOR since EOR already has established legal frameworks and structures in the host nation. EORs are already registered and incorporated, so leveraging on their services will save you from creating local incorporations.
Adherence to Travel Obligations
The constant variation and instability of immigration laws worldwide have made immigration a delicate process. Most nations have heightened their surveillance on visa processing, permit issuance, etc. Any breach of these regulations will put the organization/company in dread situations. Thus, ensuring compliance with immigration is a must for organizations that have globalization plans.
Since compliance is expedient in ensuring safe immigration activities, engaging an employer of record service is of great benefit. EOR will ensure that the works of workers in the host nation are lawfully permitted. They will carefully oversee workers’ visas and work permit obligations. Thus, they successfully alleviate any immigration risks.
Operate with the targeted region’s payroll
When working in foreign countries, you might be required to work with the localized statutory payroll in that region. Few or no countries in the world accept the use of distant/foreign payrolls in their country. Moreover, the process of calculating and compiling taxes, filing them, and ensuring compliance anywhere is overwhelming.
However, an employer of record is available to provide your organization/company with easy access to localized payroll in the host nation. They also have professional and fast solutions in ensuring complete payroll processing.
Guide to Selecting an Employer of Record
Considering the luxurious benefits of an employer of record, it’s imperative to carefully select an EOR that will suit your organization. You can use the questions below as a guide to choosing an employer of record service for your organization:
- What are their last history and activities in the targeted region?
- Are their employment contracts in alignment with your organization’s standards and interests?
- How well do they comply with foreign laws and financial statutory?
- What are their servicing charges and work rate?
- Do they have past and strong records in your company’s field?
EORs vs GEOs?
An Employer of Record (EOR) is considered to be a minor of the Global Employment Organization (GEO). EOR is just one of the innovative services that GEO provides. Moreover, while GEO is situated in a country, EOR has branches in several nations. GEO engages EOR services in handling talents’ employment payroll while they manage the employer-employee relationship.
PEOs vs EORs
While EOR assumes complete employment obligations, Professional Employment Organization (PEO) doesn’t. Like GEO, PEO is also situated in one region but EOR has several international presences. PEO only sign an employment contract with the employer company but EOR signs an employment contract with both the employer company and its workers.
What is the future of Global employments using GEOs/EORs
The pandemic has increased the effectiveness and importance of globalization in businesses. Companies around the world need to launch into the global market and engage foreign talents in scaling up their businesses. However, as good as this may sound, the risky factors attached to the process will heap great consequences for an organization when proper measures are not in place. Thus, the services of an employer of record are ever relevant to all global organizations. The higher the rise in globalization, the brighter the future of EOR.
Is an Employer of Record right for you?
Employers of Record are external companies/agencies/organizations that carry out all international hiring responsibilities, manage international employment laws and international hiring payroll functions of foreign talents in place of companies overseas.
GEO has wider international coverage than PEO. PEO operates in-country but the operations of GEO are global. While GEO works with both workers and employer companies, PEO only works alongside the employer.
EOR services are needed when an organization that wants to explore globalization need to mitigate risks, avoid statutory law violations and ensure compliance with employment obligations.